FirstEnergy Corp. plans to shift gears and to add relatively inexpensive natural gas-fired generating capacity at two existing plants so it can avoid costly short-circuits in power supply during high-use periods.
The Ohio Edison and Toledo Edison subsidiaries of Akron-based FirstEnergy have applied to the Ohio Power Siting Board to add gas-fired generating capacity at plants in Lorain and Defiance counties. The Lorain project would cost $144 million, while a cost estimate for the Defiance project was not available. The expanded plants would be capable of generating a combined 965 megawatts of electricity vs the current 220 mega-watts.
'Based on the experience with the price spike for purchased power during 1998, we feel we need more economical alternatives to the short-term wholesale market,' said Kristen Baird, a FirstEnergy spokeswoman.
A freak combination of hot weather, scheduled power plant outages and tornado damage last June 25-27 led to hundredfold increases in the prices FirstEnergy had to pay other utilities and wholesalers to provide electricity to its 2.2 million customers in northern Ohio.
Analysts say the proposals to add gas-fired generating capacity represent a switch in strategy for FirstEnergy. The company has focused on acquiring power plants with the aim of becoming a major regional generator of electricity, as power markets across the country free generators from government regulation.
The project at FirstEnergy's West Lorain plant would add five gas-fired combustion turbines to three existing oil-fired units and would boost the plant's peak output to 575 megawatts from 120 mega-watts. The gas would be supplied through FirstEnergy's Marbel Energy Corp. subsidiary and carried through a 10.6-mile pipeline connecting to Columbia Gas of Ohio and East Ohio Gas pipelines. The gas-fired units would be used only at times when the utility must meet higher-than-normal demand.
Ms. Baird said FirstEnergy hopes to have the siting board's approval by the end of the year and t
o have the extra units ready for next summer.
The Defiance County project would add two or three gas combustion turbines to the two small units at a Toledo Edison substation in Defiance. It would boost the plant's capacity to 390 mega-watts from 100 megawatts. The units would be installed by Mid-Atlantic Energy Group., a Pittsburgh-based independent commercial power plant developer. Toledo Edison would lease and operate the equipment from Mid-Atlantic, Ms. Baird said.
H. Peter Burg, chairman and chief executive of FirstEnergy, said in a May 13 presentation to industry analysts that the company would rather pay down its estimated $8 billion debt for past power plant production than buy full-fledged, base-load generating units, according to analysts who attended the meeting.
The company has settled on augmenting the power supply from its 11 coal-fired and four nuclear plants with the cost-efficient, gas-fired plants during peak demand periods, Mr. Burg told analysts. The gas-fired plants' output will be used only by First-Energy, and only during times when demand increases beyond normal levels.
'It's a switch to the retail mentality from the wholesale mentality,' said Linda Byus, utility industry analyst with Dresdner Kleinwort & Benson, a New York investment firm. 'It is very much the trend nationally to build these relatively low-cost, high-efficiency units to handle peak demands.'
Daniel Poole, utilities analyst for NatCity Investments, the investment wing of National City Corp. of Cleveland, said the trend toward gas-fired units makes sense for utilities such as First-Energy as they prepare for competition in electric generation.
'It makes sense because the gas supplies are readily available, and it is a cheap resource,' Mr. Poole said. 'With deregulation in many states, lots of utilities are abandoning generation entirely because there are risks. But someone has to generate the electricity we all need.'
In Ohio, legislation that would remove power generati
on from state regulation has been approved by the state Senate and is under debate in the Ohio House.
FirstEnergy isn't the only company interested in using midsize, gas-fired plants to meet specific temporary needs.
Richard Kimmins, spokesman for the Public Utilities Commission of Ohio, said the Power Siting Board will hold a hearing today, May 24, on a request by Duke Energy Madison Inc. to build a 640-megawatt 'merchant' plant in Butler County, near Dayton. Duke Energy is an affiliate of Charlotte, N.C.-based Duke Power Corp.
Unlike the FirstEnergy projects, the Duke plant would sell power to prospective buyers instead of dedicating its output to one utility, Mr. Kimmins said.